Iconic mine at the centre of a raging political battle

In a world where Brexit and the relentless cycle of depressing covid statistics dominate headlines, a story of huge geopolitical significance has escaped the public’s attention. One of the biggest, most valuable, and iconic mines on the globe is at the centre of a raging political battle.  It’s set to become a huge item of contention in a forthcoming presidential election. 

In Mongolia, in the South Gobi region, towards the border with China, lies one of the world’s richest sources of metal. It’s the giant Oyu Tolgoi copper mine, held 34% by the Mongolian government and Turquoise Hill, majority-owned by Rio Tinto, holding the rest.

The mine started producing above ground in 2011, and expansion underground should see total output of copper climb to 500,000 tonnes per year – putting Oyu Tolgoi third in the world rankings. It’s hard to think of an industrial site upon which so much rests: Mongolia is a developing country, and at full production the massive mine is set to account for more than 30% of its entire GDP. The equation is simple: with the mine working efficiently, Mongolia can reach a higher level of prosperity; without it, the nation and its people will continue to struggle.

All of which explains why the mine has become a magnet for high-level political dispute and intrigue. Mongolia’s former Prime Minister Batbold Sukhbaatar remains the senior member of the ruling People’s Party and is one of the party’s likely 2021 presidential candidates. Though not part of the negotiation team, Batbold was Foreign Minister when the deal to develop the mine was struck. Subsequently, as Prime Minister he was determinedly pro-markets, a progressive and moderniser.

The mine, which was the main magnet for large European and US investors, has become a symbol of the new, open for business, Mongolia. Some are opposed to it for that same reason. They resent the presence of the foreigners, believing the mine and its copper belong to Mongolia. They accuse Turquoise and Rio Tinto of exploiting the country’s natural resources and not putting enough back.

If he stands, Batbold is likely to be opposed by the current President, Khaltmaagiin Battulga. He is an admirer of Vladimir Putin, speaks Russian, loves Putin’s favourite sport of judo and has a Russian partner, Angelique. And at his inauguration he went out of his way to mention approvingly both Russia and China.

Battulga has sought to broaden the range of overseas businesses in the nation, encouraging them to fund developments in non-mining sectors. He’s also resurrecting a draft law requiring foreign investors to use Mongolian banks. The proposal was rejected previously as unworkable and likely to deter overseas firms, but it has since reappeared. They are unlikely to risk their money should there be a possibility that one day accounts may be frozen by the government and transfers blocked. The move may be a ploy designed to pressure Rio Tinto, part of a broader plan to loosen the corporation’s grip.

The worry, though, is that in doing so Battulga may dissuade other investors and deliberately or unwittingly open the door to Russia or China, both of which would like to get their own hands on Oyu Tolgoi. Such a move would be closely watched by the United States. As the EU just discovered, Joe Biden’s administration looks every bit as belligerent towards China as Donald Trump was. Just this week, Jake Sullivan, Biden’s National Security Advisor, publicly raised concerns about the EU-China business investment agreement currently being negotiated.

In this way the mine has become central to the debate about Mongolia’s future direction, a political football as the election nears. The temperature has been raised by the launch of lawsuits in New York and Mongolia alleging corruption by Batbold in relation to contracts to develop the mine – claims that the former Prime Minister denies. The New York court found for Batbold and dismissed the action, but it indicates a determination by his opponents to make the mine an issue

The actions, which claim to be in the names of three Mongolian government agencies, have raised eyebrows. They are seen as deliberately political, really doing the current President’s bidding, designed to weaken his rival Batbold’s national and international standing. They’ve been coordinated by Mongolia’s Deputy Prosecutor General, himself appointed by the President – something that has also not gone unnoticed.

The litigation is expensive to pursue, involving numerous teams of lawyers. The agencies are basing their efforts on a report prepared by Jules Kroll, the veteran business and financial investigator, founder of the Kroll intelligence agency and now running his own K2 consultancy. Critics are wondering how much the lawyers and Jules Kroll are being paid, and whether such a clearly political tactic is a proper use of public money, especially at a time when Mongolia should be trying to conserve funds to source vaccines to defeat Covid-19.